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Reverse Mortgages Comparison - What are the loan types?

Posted on: 02nd Feb, 2006 03:26 am
Reverse mortgage is a financial planning tool that helps seniors remain in their homes, and supplement their retirement income. It is also an option that most seniors use for their healthcare expenses, home modification purposes and also for maintaining cash reserve. These home loans are available in three forms as given below:

FHA-Insured reverse mortgage:

Home Equity Conversion Mortgage or HECM is the only FHA insured reverse mortgage available to seniors who are at least 62 years old. The FHA (Federal Housing Administration) insured loan guarantees that you will receive the loan advances even if your lender defaults.

You should occupy a single family home or condominium as your primary residence. Usually these home loans are available at adjustable rates. The monthly payment depends on how quickly your loan balance grows but not on the variation in rates. You can also change the mode of payment at minimum cost.

The FHA-Insured loan for seniors has the following payment options:
  • A line of credit.

  • Monthly loan advances for a specified period or a long as you wish to occupy the property.

  • Monthly loan advances along with a line of credit.

Lender-insured reverse mortgage:

These home loans are available in monthly loan advances or loan advances along with a line of credit for as long as you occupy your residence. The lender may charge you a fixed or adjustable rate along with mortgage insurance premiums (fixed or variable) and other loan fees.

Lender insured home loans often provide higher loan advances compared to FHA-insured reverse mortgages. You may also qualify for a loan amount less than your home value. These loans require you to pay higher costs than those insured by the FHA.

Some lenders also offer an annuity that pays you monthly even if you sell off the home and move out. But the annuity payments may require taxes and affect your eligibility for Supplemental Security Income and Medicaid. These may also include additional charges that depend on increases in your home value during the loan period.

Un-insured reverse mortgage:

Seniors can avail monthly loan advances for a fixed period only. Your loan becomes payable when you stop receiving the loan advances. With this kind of a loan, you will be offered a fixed rate of interest. No mortgage insurance premium is required for this loan. The loan fees are quite lower than that of lender-insured and FHA-insured mortgages.

An un-insured loan is a suitable option when you need short term but substantial amount of cash. It allows you to avail higher monthly advances unlike all other plans.

Related Articles
What are the things to look at while I consider for an uninsured reverse mortgage?
Posted on: 02nd Feb, 2006 08:37 am
Hi,

While you consider an uninsured reverse mortgage, you have to make a plan and decide accordingly -

  • The amount of money that is required by you in each month.
  • The number of years for which you need the money.
  • A way to make repayments when the loan comes due.
  • After the repayment, how much you require as remaining equity.

You must have a definite source to make the repayment as you have to pay back the loan within a specific date. You have to be careful here as if you can't repay the loan then you may have to sell your home.

Regards,
Blue
Posted on: 02nd Feb, 2006 09:16 am
Why HECM has become the most popular of all the reverse mortgage types?
Posted on: 02nd Feb, 2006 09:30 am
Hi,

You have mentioned correctly that HECM or home equity conversion mortgage is the most popular of all the reverse mortgage types.

The probable reasons are -

  • You can get more cash and more flexibility in the mode of payment through HECM.
  • It is the only type of reverse mortgage that is insured by the federal government through FHA.
  • The fees and costs are lowest for HECM amongst all other reverse mortgage programs.

These are few reasons for which most people looking for a reverse mortgage opt for this type.

Regards,
Blue
Posted on: 02nd Feb, 2006 09:37 am
Does this effect Social Security in any way or Medcare ?
Posted on: 28th Jan, 2008 01:55 pm
Hi Joseph,

Welcome to the forum.

Reverse mortgage does not effect "Social Security in any way or Medicare " because Social Security or Medicare is not based on your assets.

Feel free to ask if you have any further questions.

Thanks.
Posted on: 28th Jan, 2008 02:19 pm
I heard the transaction fees can be as much as 13,000 and up is it true?
Posted on: 26th Feb, 2009 10:50 am
I don't think transaction fees should be such higher. To know more about reverse mortgage costs, you can take a look at the given link:
http://www.mortgagefit.com/reverse-costs.html
Posted on: 26th Feb, 2009 10:05 pm
What amount of the appraised value can one get under the HECM progrm? Is it a 100% LTV?
Posted on: 09th Dec, 2009 01:08 pm
Hi,

The loan-to-value or LTV on a HUD-insured HECM depends primarily on the borrower's age and the current interest rate. Usually, the older the borrower the higher the LTV.
Posted on: 10th Dec, 2009 05:36 am
Can a 60 year-old qualify for a reverse mortgage?
Posted on: 01st Feb, 2010 01:58 pm
I already have the equity since I sold my house. I was told I can put my equity into a reverse mortgage for a house in another state. Is this true? Where can I get info on my situation?
Posted on: 23rd Jun, 2010 05:06 pm
Welcome nonymous,

You have to be 62 years old in order to get a reverse mortgage. If you're 60 years old, then you won't qualify for a reverse loan.

Welcome anna,

As far as I know, as per a new law, you can buy a new primary residence by using a reverse mortgage. Your lender can help you with correct information in this regard.
Posted on: 23rd Jun, 2010 11:58 pm
No one ever answer about a reverse mortgage on a mobile home in a park with a bank or lender name, just that some do it. But what banks or lenders are out there that one can use.
Posted on: 20th Apr, 2011 10:39 am
Hi joy!

Welcome to forums!

Very few lenders will be ready to give a reverse mortgage for a mobile home. It will be quite difficult to name some of those lenders. This community has a large number of lenders who participate in the forum discussions. You can seek a no obligation free mortgage quote from them and check out if they can help you in this matter.

Feel free to ask if you've further queries.

Sussane
Posted on: 20th Apr, 2011 10:36 pm
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